Owning a life insurance policy is essential when you want to give your loved ones financial security. However, what if the time comes when your loved ones no longer depend upon you or your income for their financial security? At some point, you may realize a greater need for income for yourself, can no longer afford your premium payments, or may simply no longer want to keep your life insurance policy. What do you do in this case?
While many people will just surrender their life insurance policy for any available cash value or let their policy lapse by not paying their premium, there is another option that you may not be aware of: selling your life insurance policy for cash. This is known as a life settlement and is important for anyone who no longer wants to keep their life insurance policy to be aware of and learn about.
Here’s are some main points you should know about life settlements.
What is a life settlement?
A life settlement is when an insured individual sells their existing life insurance policy to an authorized third party for a one-time cash payment. Once you finalize the sale of your life insurance policy, you will receive immediate payment and stop paying your life insurance premiums.
The payment for a life settlement is more than the surrender value of your life insurance policy but less than the death benefit. The amount you receive up to the total premiums paid will generally be tax-free. All proceeds above that amount will be taxable.
How does a life settlement work?
Like purchasing a life insurance policy, you must apply for a life settlement and this process includes going through a health assessment similar to what you went through when you applied for your life insurance policy (but without an exam requirement). During this process the company assesses your health and life expectancy through a review of your medical records and health history.
Upon successful completion of a life settlement, ownership of the life insurance policy transfers to the life settlement provider. This company takes over the policy and becomes responsible for paying premiums and everything else related to the policy. Upon the death of the insured, the life settlement provider is then the one to receive the death benefit payout.
How can a life settlement benefit me?
A life settlement allows you to receive an early payment of proceeds from your life insurance policy before your death. If you qualify, it is generally a better option than letting a policy lapse or surrendering it for cash value if the death benefit is no longer needed or the premiums become unaffordable. The proceeds from a life settlement can be used for any purpose you would like, including:
- Supplementing retirement funds
- Medical costs
- Long-term care expenses
- Travel or other luxuries
- Anything else you want to use this money for
How CEG Life can help
Your life insurance policy is an asset and can be worth much more than you might think. If you no longer want or need your life insurance policy, or if the cost of keeping it is too great, you may be able to sell it for much more than the cash value in it, and even if there is no cash value! And we can help.
CEG Life’s expertise, connections, and industry knowledge can help you sell your life insurance policy for cash and provide you with money when you may need it most. If you are concerned about whether or not you can afford to keep your policy, or if you are just no longer interested in keeping it, contact us today and we can discuss the option of a life settlement. We would love to work with you.